Data Center Electricity Costs: How Power Is Priced and Billed

Data center electricity costs are hard to compare because two different bills hide behind the phrase. One is what the site pays: a utility tariff, a wholesale contract or the fuel for its own plant. The other is what a tenant pays the provider, which may bundle that cost into one rate or pass it through line by line.

This guide covers both: the units on each bill, the charges that surprise people (demand charges, ratchets and capacity costs), the pricing models providers use, and why power costs in the PJM region have climbed. Prices come from the US Energy Information Administration (EIA), PJM and Oak Ridge National Laboratory (ORNL), each with the year it covers.

What makes up data center electricity costs?

Data center electricity costs come down to two quantities: how much power you can draw at once, and how much energy you use. Power is measured in kilowatts (kW) or megawatts (MW). Energy is power over time, in kilowatt-hours (kWh) or megawatt-hours (MWh). Most bills charge for both.

A large commercial or industrial electricity bill usually has these lines:

• Energy charge (per kWh). The electricity used in the month, sometimes priced by time of day or season.
• Demand charge (per kW). Your highest rate of use in the month, which pays for equipment sized to your peak.
• Customer charge. A flat monthly fee for metering and service.
• Riders. Fuel adjustments, transmission costs, programs and taxes.
• Capacity costs. In regions with a capacity market, such as PJM, the cost of keeping enough generation ready for peak hours reaches the bill through the supplier or utility.

If you lease space from a provider, you don't see this bill directly. You see whatever the provider builds on top of it.

How much does electricity cost a data center per kWh?

There is no single price. The public benchmark is EIA's US average for industrial customers: 8.51 cents per kWh in 2025, against 13.37 cents for commercial customers. Large sites usually pay nearer the industrial figure.

EIA explains why: industrial customers take large amounts of power at higher voltages, which is cheaper to supply, so their price sits close to wholesale. A data center with its own substation looks more like an industrial customer than an office.

Prices have been rising. EIA's figures for the US average:

Location matters as much as the year. In August 2026 (preliminary), EIA's average industrial price was 7.21 cents in Texas, 9.75 in Ohio, 9.98 in Virginia and 10.47 in Pennsylvania. A specific site's price depends on its tariff or contract, load shape and voltage.

Cooling and power conversion add energy on top of what the servers draw. Our guide on how much power a data center uses explains IT load, facility load and PUE.

How do data centers charge for power?

Providers charge tenants for power in a few ways. The main difference is who carries the risk of energy prices changing:

• All-in per kW. One monthly rate per kW of committed capacity covers space, power, cooling and energy. Easy to budget. The provider carries energy price risk and prices it in.
• Per kW plus energy pass-through. A monthly rate per kW pays for the capacity (building, power and cooling), and the energy you use is billed separately, often at cost plus a defined factor for cooling and losses. You carry the energy price risk but see the real cost.
• Per circuit or breaker. Common in smaller retail colocation. You pay for each circuit's rated capacity whether you use it or not.
• Metered energy only. You pay for kWh used, usually with a minimum or capacity charge so the provider recovers the infrastructure cost.

Read two terms carefully. Committed kW is what the provider reserves and bills for, used or not. Pass-through energy should be defined: which meter, what price basis, and any multiplier for cooling or losses. A pass-through with an undefined multiplier is not much clearer than a bundled rate.

For multi-year AI deployments, per kW plus pass-through is common because both sides can see where the money goes. Our guide to GPU colocation covers the rest of the lease.

What are demand charges and ratchets?

A demand charge bills your highest rate of use in the month, per kW, on top of the energy you used. It pays for wires and transformers sized to your peak, even if you hit it once.

An ORNL guide for DOE's Better Plants program explains the measurement. Utilities average use over short windows, often 15 minutes: 25 kWh used in one 15-minute window is 100 kW of demand. The highest window sets the charge for the month.

Two clauses can make billed demand higher than actual demand:

• Ratchets. Billed demand is the larger of this month's peak and a share of the highest peak in the past 11 months, usually 70%–80%, according to ORNL. One spike can raise bills for most of a year.
• Coincident peak charges. Some tariffs measure your demand when the grid peaks, not when your own site does.

AI training loads run near their peak for long stretches. That helps: fixed per-kW charges spread over many kWh. A site that spikes once and then idles pays far more per kWh used.

Why are data center power costs rising in PJM?

PJM, the grid operator for 13 states and the District of Columbia, runs an auction that pays generators to be available at peak. Its price has risen more than tenfold since the 2024/2025 auction, and PJM ties most of the forecast load growth behind it to data centers.

The results of PJM's Base Residual Auction, by delivery year:

• 2024/2025: $28.92/MW-day.
• 2025/2026: $269.92/MW-day for most of the footprint.
• 2026/2027: $329.17/MW-day, at the price cap agreed with FERC and the PJM states.
• 2027/2028: $333.44/MW-day, at the cap. PJM says nearly 5,100 MW of the roughly 5,250 MW rise in forecast peak load came from data centers. Supply fell 6,623 MW short of the reliability requirement.
• 2028/2029 (held July 2026): $325/MW-day, at the cap for the third auction running, and 6,831 MW short of the requirement.

Both of the last two auctions totaled about $16.4 billion at the clearing price. PJM notes that capacity is a fraction of wholesale costs, wholesale costs are only part of a retail bill, and load hedged through self-supply or bilateral contracts is not exposed to the clearing price. For 2026/2027, PJM expected some customers' bills to rise 1.5–5%.

For a data center in PJM, capacity cost reaches the bill through its supplier or utility. PJM is also developing "connect and manage" rules that would let large new loads connect if they can cut use when the grid is stressed, which could change the cost and terms of grid power for new sites.

How much does it cost to run a data center's power for a year?

Estimate the energy part with simple arithmetic: average load in kW, times 8,760 hours, times the price per kWh. Demand, capacity and fixed charges come on top.

A worked example, not a quote. A site drawing a steady 1 MW at the facility meter for a year uses 8,760 MWh, or 8.76 million kWh. At EIA's 2025 US industrial average of 8.51 cents per kWh, the energy alone is about 746,000 US dollars. Halve the load and the energy cost halves.

What changes the real number:

1. Utilization. Capacity charges are paid on the commitment; energy on what you use, which is usually less.
2. Overhead. Cooling and power losses add to the IT load at the facility meter.
3. Location and contract. State averages differ by several cents per kWh.
4. Load shape. Peaks drive demand and capacity charges; a flat load spreads them thin.
5. Source. A site with its own generation pays for fuel, the plant and upkeep instead of a utility tariff.

On that last point: behind-the-meter data centers avoid many grid charges, including capacity costs passed through a utility, but pay for spare generating units, fuel contracts and staff. Cost then tracks fuel prices, not the tariff. See how gas-powered data centers secure firm fuel.

How to compare power pricing between quotes

Put every quote in the same terms first. A low per-kW rate with expensive energy can cost more than a higher all-in rate. Ask each provider, in writing:

1. Is the per-kW rate charged on kW committed or kW used?
2. Is energy included? If not, at what price, from which meter, and with what multiplier?
3. How are changes in energy or fuel prices passed on, and how often?
4. Are demand, capacity or transmission charges passed through, and how?
5. What does going over your committed kW cost, now and later?
6. Which escalators, minimum bills and taxes apply?

Then model the same load across every quote: expected average draw, committed kW, and two or three energy price scenarios. The cheapest quote today is not always the cheapest over a five-year lease.

Our honest take: an all-in rate is easier to budget, and a pass-through is easier to audit. Neither wins every time. What matters is energy terms written clearly enough to check each month's bill.